China’s Steam Coal Prices Going up North

Steam coal or thermal coal as it is known is used as a fuel to produce electricity. China is the leading producer of coal in the world and two-thirds of the nation’s electricity is obtained from steam coal. Unfortunately, with the surging price of coal, the country is facing power shortages.

China’s Woes on Steam Coal

Steam coal prices in China have been heading north since the last two years. It has risen by about 20% since last year. With increased power consumption, the price of thermal power has shot up. The price rise has also been due to increase in production and transportation costs. Over 1/4 of China’s coal has to be transported from the north to the south, which is costly and put great strain on China’s logistics system. Hence an increase in transport costs will impact the price of this fuel.

Industries that depend largely on power are the worst affected. Some provinces in China have gone to the extent of rationing power to such industries. China is facing a crisis in the power sector with the rising prices of thermal coal. Analysts predict a slump in the economy if the country does not raise the power tariff.

Infrastructure issues are another factor for the increase in steam coal price. Coal production regions are located far away from the market centres. In addition railways and ports are not in close proximity.

Imports of Steam Coal

Amidst fears of a serious shortage of power, China’s imports of steam coal was increased before the summer season set in. But overall imports have declined especially early this year which has resulted in reduced stocks in the power plants. The reduced imports were also due to related problems in Queensland, Australia which consequently led to a shooting up of steam coal prices globally.

Analysts say that China will play a major role in the steam coal market and increased local consumption will most likely boost its imports to a great extent. The northern regions of China especially the interior parts of Mongolia and the Xinjiang Province are the sources of thermal coal. Additionally, thermal coal production has increased even in the smaller provinces.

The National Development and Reform Commission of China have issued warnings to thermal producers against price hikes and steps are being taken to control prices.

Jon Smith - About Author:Author is a contribute writer and industries analyst. He writes many articles about different industries. Now he is associated with en.excoal.com and writing about steam coal and steam coal prices.